What those mind-blowingly huge art auctions really mean

FORTUNE — Art auctions, the big ones, are like theater in the round, inverted. All the action plays out along the edges, in the phone banks, the players nearly all employees of one of two companies — Christie’s or Sotheby’s, which together control about 98% of the global auction market — representing the folks buying the art. It’s obvious but still must be said: The folks buying the art are rarely actually there in the room, they’re on the other line, often halfway around the globe.

Oh, it is still an event. The rich, the semi-rich, the scenesters and hangers-on all filed in Tuesday night at Christie’s, one-by-one, glad-handing and back-slapping and murmuring over Bacon’s “Three Studies of Lucian Freud,” which hung on the wall to the right of the stage, lit up and glowing like a shrine. But a shrine to what? Not art in any pure sense of the word, especially not after the Bacon sold for $142.4 million, the highest price any piece of art ever fetched at an auction. And what were we there for if not to actually see people raise those paddles and gigantic sums of money were tossed about, the equivalent to hand-to-hand combat for the .01%?

The thing to keep in mind is that it really is so much like theater, and as such is “woefully predictable,” as Sarah Thornton, the author of Seven Days in the Art World, puts it. “At all the auction houses, lots 1 through 6 are young, sexy things. Lot 13 hits the jackpot. Lots 48 through 55 are dusty works for the elderly end of the market. There were some record prices but, oh dear, so-and-so failed to sell. The exact numbers may vary but the story is the same.” This is pretty much dead on.

At Christie’s, beyond the Bacon, Jeff Koons’s “Balloon Dog (Orange)” was the other big news — it sold for $58.4 million, in lot 12. The Bacon came earlier, lot 8A, but it had been moved up. The number eight, it should be noted, is auspicious in China, and the Chinese market is hugely important. So the big numbers came early and were news that wasn’t really all that surprising. Both went for a bit higher than their estimates. And the art critics did their usual freak-out about the commodification of art:

$142 million is beyond comprehension, as is $58. It’s time for these guys to develop other interests. What about philanthropy?

“Auctions make me sick. I can’t stand them. They’re ruining the art world. They change the conversation from art to money, from quality to quantities, and now those quantities are mass quantities.”

And the business press applauded, because the high prices means there are more extremely wealthy people around to vie for a single work before the hammer falls. But still none of this gets at the nature of art purchasing in these echelons and why auctions remain such brutally efficient market machines. The way to think about art is not as an interesting thing to hang on your wall or put in your lawn, and certainly not as a charity, but as an asset, pure and simple.

Buying art is a lot like buying land, but worse because you can’t develop it — it just sits there. It doesn’t generate an income like a dividend stock or a building you can rent. (Unless, of course, you want to charge admission to see your work of art — but, wait, what are you, a weirdo?) Like land, though, art does accrue value, and pretty fast. The idea is that you get a big payout over time, one that more than makes up for all the income you “lost” — or simply did not gain — while you were holding this asset. So there are more billionaires today than there ever have been before, and art (like land) is a rather good place to park huge sums of money. Just why these sums are so historically huge says quite a lot about the times we live in.

We buy up assets when we feel the world is safe for spending and interest rates are low. This is a hugely simplified version of Bernanke’s “wealth effect” theory: We will spend more and feel wealthier because it’s cheap to borrow money, and because we have things we will spend still more, because we feel the world is safer for spending. It is no small thing that the last record for an artwork at auction came in 2008, just before Lehman Brothers declared bankruptcy and the world began to feel very unsafe indeed. Things are much safer feeling today, but could they feel safer still? And if they cannot, does that mean we have reached some peak and are due for a crash? Maybe. Probably. I don’t know — how do you feel about the future?

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